ARBITRATION OF ANTI-TRUST CLAIMS IN THE UNITED STATES AND EUROPE: A COMPARATIVE ANALYSIS

By Shriya Maini[1]

 

Today, anti-trust claims in the U.S. are regarded as arbitrable provided the dispute is encompassed within a valid arbitration clause in an international transaction[2]. Though extensive, the extent of arbitrability of anti-trust claims is not unequivocally absolute. Even though the U.S. courts endeavor to avoid any post-award review, the standard of such review and the courts’ attitude of deference enable the extent of arbitrability to remain an open question. In contrast, the E.U. appears to be more cautious in allowing the arbitration of anti-trust claims (arbitrability stage) and is also more vigorous in reviewing awards to ensure adherence to national statutory objectives (review stage). The extent of arbitrability of anti-trust claims in the U.S. appears to be similar to the E.U. at the arbitrability stage but far more rigorous and precise at the review stage.

THE U.S. APPROACH:

In the U.S., the initial reluctance to permit arbitration of such claims was based on the premise that the public interest in anti-trust enforcement, the complexity of anti-trust laws, and the inadequacy of arbitral tribunals made the nature of private anti-trust claims inherently ‘incapable’ of settlement by arbitration[3]. In fact, the mere appearance of an anti-trust claim operated akin to a statutory bar. However, the seminal decision of Mitsubishi Motors[4] rejected the American Safety doctrine[5], in effect affirming that arbitration of anti-trust claims did not violate U.S. public policy. Justice Blackmun rejected Soler’s argument, opining that “by agreeing to arbitrate a statutory claim, a party did not forgo the substantive rights afforded by the statute; it only submitted to their resolution in an arbitral, rather than a judicial forum”. His judgment was later extrapolated to suggest that permitting arbitration of anti-trust claims had no substantive legal effect, but amounted to a mere change in venue. While some scholars accept this notion, others jump to question its accuracy. Professor James R. Atwood proposes arbitration to be “a new avenue by which private parties could seek to resolve international anti-trust disputes under U.S. law without having to employ the heavy machinery of the federal judiciary”.[6] This seems undoubtedly correct, especially in the light of the positive doctrinal scope which the U.S. intends to accord to the extent of arbitrability of anti-trust claims. Besides, the Court’s opinion (that denial of the arbitrability of anti-trust claims based on the argument of the mandatory nature of anti-trust/competition law was groundless) formed the basis of the judgment. Basing its dicta on a strong federal policy favoring arbitration[7], the majority (citing Bremen[8], Scherk[9] and the U.S.’s implementation of the New York Convention[10]) further expressed fear of loss of business and industry if exclusive jurisdiction were bestowed upon American Courts to adjudicate anti-trust claims.

 

Though Mitsubishi Motors[11] left the question open as to whether domestic anti-trust claims could be arbitrated, subsequent American case law formally extended its reasoning to anti-trust claims in purely domestic disputes as well. Smokey Greenhaw Cotton Co.[12] implied that though Mitsubishi Motors arose in an international anti-trust dispute and its holding purported to be limited to that context, its broad language carried significance for domestic disputes as well.

 

Today, while interpreting and applying Mitsubishi Motors[13], courts have been generally willing to defer anti-trust decision-making to arbitrators, but have also set a few restrictions. Simula v. Autoliv[14] upheld that even if international arbitrators do not apply U.S. law, foreign law was an acceptable substitute unless “the law of the transferee court was so deficient that the plaintiffs would be deprived of any reasonable recourse.” Hence, in permitting arbitration, courts are simply not entrusting enforcement of U.S. anti-trust law to arbitrators, but are also permitting arbitral adjudication of U.S. anti-trust law to remain virtually free from any post-award substantive review i.e. the Second Look doctrine. Evidently, the scope of review in U.S. is substantially limited in comparison to that in the E.U.

 

THE E.U. APPROACH:

Au contraire, steps to allow the arbitration of anti-trust claims in the E.U. were taken later and with greater reluctance. The ECJ indirectly took up the question in Eco Swiss[15], where it suggested the possibility that disputes concerning anti-trust claims may be resolved by means of arbitration. Despite the fact that the ECJ did not expressly affirm the arbitrability of competition claims, it made it incumbent upon a national court in the E.U. to annul an arbitral award that infringed Article 81 of the EC Treaty[16] in circumstances where domestic rules of procedure required it to annul an award contrary to public policy.

 

However, what has been hotly contested since the Eco Swiss case[17] (which merely stated that judicial review “may be more or less extensive depending on the circumstances”) is the ‘level of review’ of the merits of competition law issues in order to decide whether an award infringes Articles 81 and 82 of the EC Treaty. Most scholars agree that while Eco Swiss[18] compels national courts to review arbitral awards alleged to be in breach of E.U. competition rules, it did not provide any meaningful guidance about the nature and/or intensity of the review. Even though the ‘extent’ of that European review remains subject to question, it is perfectly clear that the review will be more rigorous than that which occurs in the U.S., as elucidated above. It is interesting to note that various courts in E.U. treat the same anti-trust award in fundamentally different ways (unless either the French SNF case[19] or the Belgian SNF case[20] is reversed in subsequent appellate proceedings) when reviewing its compliance with international public policy[21]. The limited approach adopted by the French courts to reviewing arbitral awards dealing with anti-trust issues appears to be in line with the global trend. It can now be safely concluded that Eco Swiss[22] did not intend to require national courts to undertake a higher standard of review in respect of EC competition law as opposed to other questions of public policy. In contrast, a detailed merits-based review of reasoning (taken by tribunal under Article 81 of the EC) that was proposed by Belgian and Swiss Courts effectively opens the way to appeals against any arbitral awards that may arguably raise competition law issues, which potentially includes a very large number of arbitral awards.

 

CONCLUSION:

Citing innumerable precedents, scholars seem to suggest that throughout the E.U., anti-trust claims are arbitrable in the ‘same’ way as U.S. anti-trust claims.[23] However, this blanket analogy does not seem very convincing. Although it may be feasible to accept that premise at the arbitrability stage, it is impossible to do so at the review stage. This is especially because stark differences exist between them, such as the scope (i.e. the breadth of the inquiries proposed) and the standard of review (i.e. the determination of the courts to conduct such inquiries).

 

 

[1] The Author is an advocate practicing at the Supreme Court of India and the Delhi High Court, New Delhi, India and is currently reading for the Bachelor of Civil Laws (BCL) at the University of Oxford, United Kingdom.

[2] Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc. 473 U.S. 614 (1985).

[3] Article V(2)(a), United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958.

[4] Supra note 2.

[5] The Court of Appeals for the Second Circuit promulgated the American Safety doctrine in American Safety Equipment v. J.P. Maguire & Co. 391 F. 2d 821 (2nd Cir., 1968), as per which anti-trust law was not arbitrable.

[6] J.R. Atwood, The Arbitration of International Anti-trust Disputes: A Status Report and Suggestions, Fordham Corp. L. Inst. 385 (1994)

[7] Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1 (1983)

[8] The Bremen v. Zapata Off-Shore Company, 407 U.S. 1 (1972)

[9] Scherk v. Alberto-Culver Co. 417 U.S. 506 (1974)

[10] Supra note 3.

[11] Supra note 2.

[12] Smokey Greenhaw Cotton Co v. Merrill Lynch, Pierce, 805 F.2d 1221 (1986)

[13] Supra note 2.

[14] Simula v. Autoliv, 175 F.3d 716 (1999)

[15] Case C-126/97, Eco Swiss China Time Limited v. Benetton International NV [1999] ECR I-3055, Judgment delivered on 1 June 1999.

[16] Now Article 101, Treaty on the Functioning of the European Union – TFEU.

[17] Supra note 15.

[18] Supra note 15.

[19] SNF v Cytec Industries BV, Judgment no. 680 of 4 June 2008, French Cour de Cassation (Paris Court of Appeal).

[20] SNF v Cytec Industries BV, Judgment delivered on 8 March 2007, Tribunal de Premiere Instance, Bruxelles (Court of First Instance, Brussels).

[21] Article V(2)(b), New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958.

[22] Supra note 15.

[23] Landi, Niccolò and Rogers, Catherine A., Arbitration of Anti-trust Claims in the United States and Europe (2007). Bocconi Legal Studies Research Paper No. 07-01. Available at http://ssrn.com/abstract=96 2334.

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